Over the past few years, Shared Ownership has often taken a back seat compared to Help to Buy, which was seen as a more favourable product in the market. However, with the end of Help to Buy in March 2023, there is a growing interest in Shared Ownership. This is evident from a 36% increase in Shared Ownership sales in FY 22/23. This shift in interest  has been further fuelled by private house builders seeking Shared Ownership deals with housing associations (HAs) in order to sell their remaining units.

In this blog, Lottie Smallwood explores why Shared Ownership is becoming a popular choice and what challenges this product is facing.

1. Rising Mortgage Rates: The Three Key Elements of Shared Ownership

Shared Ownership usually requires buyers to pay rent for the portion of the property that they don’t own, as well as paying a service charge for the maintenance and upkeep of the property. The third element is the mortgage payment, which the buyer pays for the portion of the property that they do own. Due to the current rental market conditions, as well as rising interest rates, these three elements are becoming more costly, making Shared Ownership less financially viable than it used to be. In addition, service charges may also be increased by property management companies due to the rising cost of living.

2. The Sustainability of Shared Ownership for Lower-Income Buyers

Due to the increasing cost of Shared Ownership packages, it is becoming financially unsustainable for lower-income buyers. Many have expressed their concerns over the tenure, as it seems that the upward-only costs of Shared Ownership make it hard for lower-income buyers to keep up with the payments. However, the government is working to address this issue by looking into ways to make Shared Ownership a more affordable and accessible option for all.

3. Eligibility Constraints of Shared Ownership

Shared Ownership has specific eligibility criteria that need to be met. For example, buyers need to satisfy certain salary caps, and they must be first-time buyers. The eligibility criteria can be restrictive, some may find it hard to meet these criteria and may need help or support from local authorities or other agencies.

4. Private House Builders’ Increasing Interest in Shared Ownership

In the absence of Help to Buy, private house builders are turning towards Shared Ownership as a viable option for selling their remaining units. They are seeking shared ownership deals with HAs. Such partnerships are beneficial for both parties as they offer private house builders a means of disposing of their remaining units while helping HAs to increase affordable housing stock and provide support to lower-income buyers. Other options have recently come to the market including both the Skipton Building Society 100% mortgage, and, more recently, Buckinghamshire BS has introduced a new Shared Ownership proposition. It was also reported that UK banks have pulled hundreds of home loan deals due to the fixed mortgage rate rising, with the average 2-year fixed mortgage rate currently sits at 5.72% (June 2023).

While there are challenges to consider with Shared Ownership, such as rising mortgage rates and service charges, as well as the eligibility criteria for Shared Ownership, private house builders’ interest in Shared Ownership is a promising sign for the future of this product. The government is also looking into ways of making Shared Ownership a more financially feasible option for lower-income buyers, and so it continues to be a viable option for buyers looking to get onto the property ladder and create a home they can call their own.